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Trading  | April 27, 2018

Just 24 hours ago, Bloomberg reported that “Oleg Deripaska Plans on Keeping Control of Rusal“, a move which suggested that the Russian oligarch would remain defiant in face of US demands that he sell his stake and/or step down as head of United Co. Rusal – the world’s biggest aluminum producer outside of China – even as the Russian aluminum giant battles for survival having lost capital markets access following the snactions.

Or maybe not: overnight we got a first indication that Bloomberg’s report was incorrect when Rusal published a Facebook post denying the Bloomberg claim that Deripaska was intent on keeping control over Rusal, and threatened to take “legal action”

And then, moments ago, we got definitive confirmation when EN+, which holds a controlling stake in Rusia, announced that Deripaska had in fact agreed “in principle” to cut his stake in EN+ to below 50%, and that the sanctioned Russian billionaire had agreed with the proposal that he will resign from board. 

As EN+ also adds, the company is seeking an urgent response to the formal request submitted to OFAC, and notes that without an extension of “authorization period for General License No. 13”, the ability of the company to maintain GDR listing on LSE will be materially impacted.

Mr Oleg Deripaska has agreed in principle to the chairman’s request that Mr Deripaska reduce his shareholding in the Company to below 50%” EN+ said in a statement.

The proposal has yet to be accepted by the US Treasury’s Office of Foreign Assets Control (OFAC), which slapped Mr Deripaska and his companies with the sanctions on April 6, saying they were part of a broad response to Russia’s “malign activity”.

Under the proposed deal, Deripaska would reduce his stake in EN+, which serves as the holding company for his assets, from above 70 per cent to below 50 per cent. The company listed on the LSE last November in a $1.5bn flotation. EN+, which is chaired by former UK energy minister Lord Gregory Barker of Battle, would replenish the board under the proposal, removing Mr Deripaska and adding new directors without links to the oligarch. EN+ would also give up its rights to nominate the chief executive of Rusal and manage the business.

As the FT adds, the proposal, announced in a statement to the London Stock Exchange, has yet to be accepted by the US Treasury, which imposed sanctions on Deripaska and his companies this month, as part of what the Trump administration described as a broad response to Russia’s “malign activity”.

It is also not clear if the Kremlin will be prepared to back the proposal, which would see one of Russia’s highest profile businessmen severed from his assets by the US.

“If the plan is accepted the logical conclusion [for OFAC] will be to release Rusal from these sanctions,” a person familiar with the situation said. “Mr Deripaska has agreed to sever the link. He does not want to see the company he has built up crumble.”

* * *

Since the new Russian sanctions were imposed two weeks ago, the share prices of the Russian companise have collapsed, as they have become essentially cut off from international markets. Meanwhile, aluminium prices have soared by as much as a third while alumina – the key raw material used to make the metal – soared to an all time high, higher by 80% as Rusal metal was shut out of the market, causing widespread fears of a supply crunch in a key part of the global manufacturing supply chain.

In response to the news, the price of Alcoa tumbled as Rusal will likely now be allowed back in capital markets, as did the price of aluminum as suply-chains are restored, while the ruble briefly spiked but has faded all gains, if only for the time being.

And so, hours after the Koreas announced a historic peace deal, Trump is set to gloat about his second geopolitical victory of the day, when just two weeks after putting the pressure on Russia, its biggest – and closest to the Kremlin – oligarch has caved and complied with US demands, if only for optical/public consumption purposes.

Oh, and the other winner, of course, is Putin himself, because just like that one of his wealthiest competitors (who may be an ally for now, but ask Khodorkovsky how that worked out), was just taken out of the game.

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